FACTORS INFLUENCING THE ADPOTION OF E-PAYMENT IN KUALA LUMPUR

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FACTORS INFLUENCING THE ADPOTION OF E-PAYMENT IN KUALA LUMPUR

DING JIA LEE HAR ZI QING SEE SUE WEI TEOH CHIA SHIN

WONG POR-LYN

BACHELOR OF BUSINESS ADMINISTRATIONS (HONS) BANKING AND FINANCE

UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE DEPARTMENT OF FINANCE

MAY 2020

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FACTORS INFLUENCING THE ADPOTION OF E-PAYMENT IN KUALA LUMPUR

FACTORS INFLUENCING THE ADPOTION OF E- PAYMENT IN KUALA LUMPUR

BY

DING JIA LEE HAR ZI QING SEE SUE WEI TEOH CHIA SHIN

WONG POR-LYN

A final year project submitted in partial fulfilment of the requirement for the degree of

BACHELOR OF BUSINESS

ADMINISTRATIONS (HONS) BANKING AND FINANCE

UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE DEPARTMENT OF FINANCE

MAY 2020

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Copyright @ 2020

ALL RIGHTS RESERVED. No part of this paper may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, graphic, electronic, mechanical, photocopying, recording, scanning, or otherwise, without the prior consent of the authors.

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DECLARATION

We hereby declare that:

(1) This undergraduate research project is the end result of our own work and that due acknowledgement has been given in the references to ALL sources of information be they printed, electronic, or personal.

(2) No portion of this research has been submitted in support of any application for any other degree or qualification of this or any other University, or other institutes of learning.

(3) Equal contribution has been made by each group member in completing the research project.

(4) The word count of this research report is 13235 words.

Name of Student: Student ID: Signature:

1. Ding Jia Lee 16ABB05665

2. Har Zi Qing 16ABB01444

3. See Sue Wei 16ABB02862

4. Teoh Chia Shin 16ABB04105

5. Wong Por-Lyn 16ABB03819

Date: 16/04/2020

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ACKNOWLEDGEMENT

We appreciate those who gives us support and assistance to bring this research completed successfully and hence, we would like to take this opportunity to convey our gratitude to those contributors.

First and foremost, we would like to express a special gratitude to our beloved final year project supervisor, Mr. Hoon Hui. He provided us many valuable suggestions and guided us properly with patience until we complete our research. We feel lucky and glad to have a supervisor like Mr. Hoon Hui as he always provided us a flexible time for us to consult him when we faced any problems in our research.

In addition, we would like to convey our gratitude to our examiner, Mr. Ahmad Harith Ashrofie bin Hanaf for giving us some valuable recommendations and suggestions which helped us in making better improvement on this research.

Besides, we appreciate Universiti Tunku Abdul Rahman (UTAR) for providing us this opportunity to conduct the research. We have gained some knowledge and experience which will improve our value that might assist in our future. UTAR has provided some facilities such as reading materials, equipment and others necessary resources to make sure we have a better environment to conduct our research.

Moreover, we would like to thank the respondents who willing to collaborate with us by providing their precious time to read and answer the survey questionnaires.

Without their assistance, we are unable to complete our research successfully.

Last but not least, teamwork among all the teammates is the most importance factor to make this research done smoothly and successfully. A deepest appreciation is given to our teammates Har Zi Qing, Teoh Chia Shin, See Sue Wei, Wong Por-Lyn and Ding Jia Lee who have contributed their effort, time and useful suggestions in the completion of this research.

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DEDICATION

First of all, we would like to dedicate this research to our final year project supervisor, Mr. Hoon Hui, for his patient guidance, encouragement and advice throughout the whole research. We are grateful to have him as our supervisor, who motivated us when we faced difficulties and who responded to our questions and queries so promptly although he was busy. Without his guidance, we may not able to complete this research on time.

Also, we would like to dedicate this research to our final year project examiner, Mr.

Ahmad Harith Ashrofie bin Hanaf, who provided us some useful suggestions and recommendation to improve our research.

Next, this research is dedicated to Universiti Tunku Abdul Rahman (UTAR) as it provides us a platform and an opportunity to gain new knowledge as well as apply the knowledge, we had learned from the classes that we attended in the campus.

Moreover, UTAR also provides us sufficient facilities and infrastructures such as reading materials, journal articles and equipment which we required to conduct our research.

Furthermore, we would like to dedicate this research to the target respondents who provided their precious time for answering the questionnaires. We might not able to complete our research without their assistance.

Inaddition, this paper is also dedicated to our families, friends and course mates for appreciating their help, mental and physical supports towards our research. Without their blessings and support, this research would not be possible.

Lastly, we would like to dedicate this research project to the future researchers to assist them in conducting their researches in the future.

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LIST OF TABLES

Page

Table 1: Pilot Test 27

Table 2: Rule of Thumb on C bach Al ha 32

Table 3: Rule of Thumb on Pearson Correlation Coefficient 33

Table 4: Demographic Profile 36

Table 5: General Information 39

Table 6: Total Variance Explained (Initial Eigenvalues) 40

Table 7: R-Squared 41

Table 8: Reliability Test 42

Table 9: Correlation Coefficient 43

Table 10: Multiple Regression Analysis 44

Table 11: Summary of Hypothesis Testing 44

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LIST OF FIGURES

Page Figure 1: Technology, Organization & Environment (TOE) Framework 15

Figure 2: Technology Acceptance Model (TAM) 16

Figure 3: Model of Trust (MOT) 18

Figure 4: Proposed Conceptual Framework 19

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LIST OF APPENDICES

Page Appendix 1: Questionnaire Permission Letter 62

Appendix 2: Questionnaire 63

Appendix 3: SPSS Output 68

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LIST OF ABBREVIATIONS

A Agree

ATM Automated Teller Machine

BNM Bank Negara Malaysia

CSM Cyber Security Malaysia

D Disagree

DV Dependent Variable

EFCC Economic and Financial Crimes Commission

EP Adoption of e-payment

EPS Electronic payment system

E-cash Electronic cash

E-currency Electronic currency

E-payment Electronic payment

E-wallet Electronic wallet

GI Government intervention

GIRO General Interbank Recurring Order

HDFC Housing Development Finance Corporation

ICICI Industrial Credit and Investment Corporation of India

ICPC Independent Corrupt Practices Commission

ICTF Interoperable Credit Transfer Framework

IV Independent variable

KL Kuala Lumpur

KLCC Kuala Lumpur City Centre

MOT Model of Trust

N Neutral

PHYINF Physical infrastructures

PU Perceived ease of use

QR Quick Response

RBI Reserve Bank of India

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S Security

SA Strongly agree

SBI State Bank of India

SD Strongly disagree

SPSS Statistical Package for the Social Sciences

T Trust

TAM Technology Acceptance Model

TOE Technology, Organization & Environment

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PREFACE

Nowadays, internet technology has become a crucial part of human life. Up to year 2018, the number of internet users in the world has grown gradually and reached 3,650 million of users. Meaning that, as more transaction choices are introduced, the e-payment system is more preferable as compared to the traditional payment system as it provides the benefits such as convenience, time saving, expenses control and user friendly. Based on the statistics from Bank Negara Malaysia (BNM), the e-payment transactions in Malaysia rose drastically from 70.9 transaction per capita in 2014 to 124.6 transaction per capita in 2018 due to Mala ia g e me licie a d i f a c e im eme . A c m a ed years before, the number of e-payment transactions are still growing and this motivates us to carry out a research to study the factors influencing the adoption of e-payment in Malaysia, especially in Kuala Lumpur, which is Malaysia's principal capital and largest city. In this research, there are four independent variables concerned, which include Security (S), Trust (T), Perceived Ease of Use (PU), and Government Intervention (GI). The research will evaluate the e-payment adoption among people in UTAR Kampar campus who came from Kuala Lumpur. Lastly, we hope that this research may provide the readers with a better insight and knowledge of the e-payment adoption among the residents from Kuala Lumpur, Malaysia.

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ABSTRACT

This research aims to examine the factors influencing the adoption of e-payment in Kuala Lumpur, Malaysia in which the independent variables include security, trust, perceived ease of use and government intervention whereas the dependent variable is the adoption of e-payment in Kuala Lumpur, Malaysia. There are three theories adopted in the research which include Technology, Organization and Environment Framework (TOE), Technology Acceptance Model (TAM) and Model of Trust (MOT). Then, in this research, the data and information were collected by using primary research data through a self-administered survey questionnaire approach.

The target respondents for this research include the people who are 18 years old and above and who are from Kuala Lumpur who study or work in UTAR Kampar Campus. Furthermore, there are total of 400 sets questionnaires distributed for data collection but only 385 sets of them were being used due to fifteen sets turned out to be invalid. Next, for data analysis, SPSS 25 was used to analyse the recorded raw data and descriptive analysis, factor analysis, reliability test and inferential analysis were applied in this process. The results of SSPS 25 concluded that all the independent variables which comprised of security, trust, perceived ease of use and government intervention are significant towards the adoption of e-payment in Kuala Lumpur, Malaysia. Last, at the end of this research, implications of study to the future researcher, consumers, business,investor and government and policy maker were found out and some limitations and recommendations for future researchers were also discussed in this research.

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CHAPTER 1: INTRODUCTION

1.1. Research Background

Electronic payment (e-payment) refers to the use of digital instruments to make payment for a product or service through the internet. There are several forms of e- payment system, including online debit card and credit card transactions, electronic wallet (e-wallet), electronic cash (e-cash), digital accumulating balance systems, digital checking payment systems, online stored value systems, and wireless payment systems (Junadi, 2015). Nowadays, internet technology has risen rapidly and has become a crucial part of a person’s life. This can be supported by the data presented by Statista Research Department (2019). The data showed that the number of Internet users in the world has increased from 1,024 million in 2005 to 3,650 million in 2018. Which means that, more transaction choices are introduced, and the e-payment systems are more encouraged on worldwide. In preference to the traditional payment system which requires buyers and sellers to contact each other physically, it is quickly replaced by an e-payment system.

Green (2018) claimed that e-payment systems carry several advantages which affect the e-payment adoption. First, e-payment is very convenient as compared to the conventional techniques of payment like cash, checks, credit and debit cards. The transactions of the e-payment can be received and sent right in a couple of seconds.

Moreover,Smith (2015) mentioned thatQuick Response (QR) codes are convenient to the companies. With QR codes, companies can promote to their customers directly by using the website to increase their website presence. Besides, QR codes can be readily added to offline media such as flyers, company cards, posters, pamphlets and signs so that the customers can scan through the QR codes to know more about their company information. QR codes can also assist the company in creating or building confidence and reputation of the brand. This is an incredibly convenient way for customers to assign or transfer funds, make payments and conduct account requests 24 hours a day throughout the year (Tsai, Huang, Liu,

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Tsaur, & Lin, 2010). Besides that, e-payment may help to reduce the expenses of both business and personal. This is because technological costs like the use of internet and computer and other equipment acquisition are greatly reduced (Josphine, 2018). As an illustration, the expenditures of paper and postal are reduced together with the amount of time spent on personal transactions. With conventional payment systems, customers able to save time in processing personal transactions. Damodaran (2017) stated that General Interbank Recurring Order (GIRO) and Instant Transfer processing costs are free for every transaction whereas processing a cheque is RM1 per transaction.

Moreover, the information from Visa Inc., aglobal payments technology company revealed that Malaysia is positioned at 19th among 73 countries in adopting government e-payment (“Malaysia Ranked 19th For Government,” 2019). As stated in Malaysia’s payment statistics, out of the population of 32.4 million in Malaysia, 124.6 units are the transaction value per person using e-payment in 2018. The main reason for increasing the adoption of e-payment is government policies and infrastructure. In order to promote the broader use of internet banking and debit card services as a convenient cash replacement and as a more cost-effective payment method, and perhaps even the government's ability to serve as the pioneer in moving to e-payment, the improvement in infrastructure is also a key to extending the availability and acceptance of all e-payment services. These efforts caused payments which were traditionally made by cash and cheques, became electronically with plastic cards or through electronic channels. Besides, the statistics from Bank Negara Malaysia (BNM) proved that Malaysia’s e-payment transactions had risen drastically from 70.9 transaction per capita in 2014 to 124.6 transaction per capita in 2018. In spite of the fact that mobile payment is still budding in Malaysia, the competition for the market is getting stronger after 48 non- bank issuers are granted e-payments licenses by the government, most of them are owned by high-profile businesses. For instance, Touch ‘n Go eWallet, which is the mobile wallet established jointly by CIMB and Act Financial, and Boost that is owned by Axiata. Other than that, there are also some of them create partnerships with banks to expand their merchant bases.

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Kuala Lumpur (KL) is Malaysia's principal capital and largest city. World Population Review (2016) stated that it includes an area of 243 square kilometers (94 square mi) with an estimated population of 1.73 million in 2016. Extensive shopping centers such as Pavilion KL and Suria KLCC are also consideres as the largest sales events throughout the year and feature a varied range of high standard labels from around the world. Therefore, it can be proved that KL has a higher purchasing power because of greater revenue. In this research, three independent variables are concerned, which include Security (S), Perceived Ease of Use (PU), T and a gap variable which is Government Intervention (GI) to be a determinant of the adoption of e-payments in KL.

1.2

Problem Statement

The purpose of the research is to identify the factors affecting e-payment adoption in KL. As stated in Malaysia’s payment statistics, the transaction value per capita using e-payment is 124.6 units in 2018. On the other hand, the amount of cash added into circulation increased gradually from 92,347.60 to 94,307.20 in 2017 and 2018 (Pikri, 2019). Even though there are some improvements, Malaysia is still far away from cashless.

The security issues affect the e-payments adoption. Nowadays, the security issues that threaten e-payment systems are full of tricks and changing extremely quickly.

According to Aishah Mohmad Afandi (2018), 46% of Malaysian consumers are dubious about the security of e-payment and e-wallet applications; besides, through the survey they conducted, 82% of Malaysian consumers store their bank account details at a minimum of one to six applications, only a quarter (25%) practiced good cyber-security by using different passwords among all of their accounts. Cyber Security Malaysia (CSM) received a complaint about e-wallets due to the treacherous use of payment and information robbery has increased. For example, the victim purchased bitcoins by using e-wallet and the balance of e-wallet was deducted, but the seller did not receive the credits that the victims paid for (Yuen, 2019). From this case, the amount of money may be stolen by someone else halfway

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while transferring to the seller. Besides, according to Borneo Post Online, in KL, a user received a phone call from an unknown person who claimed to be a police officer from Bukit Aman and obtained personal information such as Identity Card (IC) number, home address and so on (“Vigilance Needed To Protect Against,”

2019).

Nowadays, people around us are using e-payment to do their transaction, purchase goods and services even online investment. This shows that society started to accept e-payment to make their transaction instead of using cash. Trust has a major impact on consumer behavior and therefore effective e-commerce. However, as stated in The Edge Market (2017), there are many individuals lost around RM4.92 billion in Malaysia because of fraud. The fraud cases include online purchase frauds, online gambling, online investment and others. Bank frauds not only happened in Malaysia, India also had over 50,000 bank frauds in the last 11 fiscal years, Industrial Credit and Investment Corporation of India (ICICI) Bank, State Bank of India (SBI) and Housing Development Finance Corporation (HDFC) Bank reported based on Reserve Bank of India (RBI) data (“Bank Frauds Worth ₹2.05 Trillion,”

2019). People will get cheated because they do not have precautions and they are having trust in the e-payment system.

Perceived ease of use is a key factor for e-payment adoption. E-payment is a new technology which associate to degree economical, price effective, strong payment infrastructure and convenience. BNM mentioned that e-payments per capita in Malaysia doubled to 111 per capita transactions in 2017 and are expected to hit 200 per capita transactions by 2020 which is rising the adoption rate (“Almost 50% Of Malaysian Consumers,” 2018). Besides that, Aishah Mohmad Afandi (2018) said that there are 70% of Malaysian consumers prefer to use electronic methods of payment, which include online transfers, Automated Teller Machine (ATM), cash, credit and debit cards. Moreover, the world is starting to move into a cashless culture with a growing utilization of cards, online banking and payment wallets (Jayaseelan, 2019). Some of the senior citizens do not even use traditional methods like credit cards, and thus resulting of spending control problems. For example,

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Singapore decided to organize a campaign to teach senior citizens to use e-payments like QR code to purchase items (Cheng, 2019).

Government intervention is the next factor affecting e-payment. It is meant by the action taken by the government with the purpose of bringing an impact to the market economy (“Government Intervention,” 2017). Visa Inc., the global digital payments service provider studied that Malaysia is placed at 19th among 73 countries in government e-payments adoption. Moreover, the ranking showed that Malaysian government has done supremely good in transforming the country to become a digital nation by implementing good policies to support e-payments security, fintech innovation and financial inclusion. Lim and Anette (2017) mentioned that although Malaysia’s overall e-payments transactions rose 14.4% in 2016, however, the growth is still considered low due to low debit card, internet and mobile banking usage. As an illustration, Alipay announced that there are 100 merchants in Malaysia accepting its digital payment, but it does not seem to have a great impact on Malaysian consumers. In addition, Igudia (2017) stated that lack of government intervention in providing adequate national physical infrastructures (PHYINF) such as transportation, rail networks, roads, electricity, and communications will influence the adoption of e-payment system. Moreover, the coverage and the availability of accepting the e-payment are the major issue of adoption.

Furthermore, national infrastructure of a country such as electricity supply and internet connectivity should be sufficient as it will affect the e-payment adoption and usage (EIU, 2006). For example, in Nigeria, if there is insufficient supply of electricity and telecommunication infrastructure, the adoption of usable technology as well as technological innovation such as e-payment will be affected (Chiemeke et. al.). Thus, to increase the e-payment adoption in Malaysia, government developed Interoperable Credit Transfer Framework (ICTF) to enhance the payment system infrastructure, which helps to ensure the flawless transfer of fund between banks and e-money wallets (Kylasapathy, Hwa, & Zukki, 2017).

There are few limitations of e-payment which are security concern, limitation on amount and time. First, Malaysian consumers felt insecure about e-wallet and mobile payment applications because they able to make a bills payment, transport

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and purchasing food and beverage in their smartphones, by just scanning a QR code or taping a button within the application. It is vulnerable to being hacked by the hacker because e-payment is easy to use and can be used at every moment (Yuen, 2019). Furthermore, Green (2018) mentioned that fraudsters use phishing attacks to get unsuspected consumers to provide their e-payment systems log-in data which they collect and use to access personal and financial data from victims. Banks might limit the quantity or number of daily transactions, so that the amount is exceeding a given figure cannot be withdrawn at the same time, or just a certain number of transactions per day are permitted. Based on the perceptions of the customers, they might find this uncomfortable while this is done as a safety measure. In electronic mode access to cash can be postponed, as opposed to physical cash access. Payment terms may need to be longer when taking e-payments. If there is no cooperation between distinct digital payment services, e-currency exchange services may need to be chosen (“Be Aware of These Disadvantages of E-Payment Systems,” n.d.).

1.3 Research Objectives

This research focused on KL, Malaysia. The research objectives are stated below:

1.3.1 To evaluate the relationship between Security (S) and the adoption of E- Payment (EP).

1.3.2 To evaluate the relationship between Perceived Ease of Use (PU) and the adoption of E-Payment (EP).

1.3.3 To evaluate the relationship between Trust (T) and the adoption of E- Payment (EP).

1.3.4 To evaluate the relationship between Government Intervention (GI) and the adoption of E-Payment (EP).

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1.4

Research Questions

This research focused on KL, Malaysia. The research questions are stated below:

1.4.1 Is there any relationship between Security (S) and the adoption of E- Payment (EP)?

1.4.2 Is there any relationship between Perceived Ease of Use (PU) and the adoption of E-Payment (EP)?

1.4.3 Is there any relationship between Trust (T) and the adoption of E-Payment (EP)?

1.4.4 Is there any relationship between Government Intervention (GI) and the adoption of E-Payment (EP)?

1.5

Significance of Study

Today, e-payment has become an essential point of consideration for anyone who wants to digitize their business. Thus, this research is critical to provide e-payment services with useful insights to provide better e-payment characteristics. The results would explore additional factors that will affect the adoption of the e-payment system in the future for the benefit of aspiring scientists and scholars. Furthermore, government intervention is one of the important factors of e-payment adoption, however, most of the researchers of this topic have ignored this important determinant (Treiblmaier, Pinterits, & Floh, 2006). Therefore, this research will discuss how the government intervention affects the adoption of e-payment. Hence, this research is useful for the potential researchers that are interested in studying the factors of e-payment adoption in future.

Besides, this research would increase the end users’ confidence towards the online payment industry including e-payment, therefore, the improvement in technology may improve the industry’s availability and credibility, and thus, more consumers are willing to make payments through online system (Baldwin, 1997). Besides, the

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findings of this research may help consumers to have a clear understanding of the determinants that affect the adoption of e-payment in KL as well as help them in eliminating the determinants that curb the adoption of e-payment that had been discovered in this research. With that, the consumer acceptance towards e-payment is able to be increased due to the better features of e-payment provided by business.

Subsequently, increase in consumer acceptance towards e-payment would be beneficial to the country because of greater economic efficiency. Going cashless is also in line with the Financial Sector Blueprint launched by BNM. Moreover, as stated in blueprint, BNM plans to improve the number of e-payment transactions per capita in the following 10 years from 44 to 200 (Bank Negara Malaysia, 2011).

Furthermore, businesses that accept electronic payment will be able to increase their sales because they are capable of making sales to consumers who prefer to pay electronically and obtain a competitor’s advantage that embrace conventional methods of payment. Moreover, e-payment provides credibility for merchants because receiving online payment is more secure than receiving payments through cheques or cash.

In addition, this research could be advantageous for investors who invest in e- payment companies or projects or are interested in the e-payment system, as investors could refer to this research about the current e-payment trend in Malaysia, so that they can make decisions on the investments.

On the other hand, this research would benefit government and policy makers as they would know that the security level of the e-payment nowadays is high, so that, government and policy makers are willing to be involved in and introduce the e- payment systems to the public. Government intervention and the ability of policy makers conduct economic activities in ways that would be beneficial to the society (Sattar, 2009). Furthermore, this research shows to government and policy makers about today’s online payment trends in Malaysia and hence, compared with competitors and improve the e-payment system so that comparative advantages are gained.

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1.6

Outline of Research

Chapter 1 introduces a quick overview to e-payment, which contains a brief information on research background, problem statement, research objectives and relevant research. Afterwards, Chapter 2 also deals with theoretical analysis, the research methodology and the review of previous empirical research. Next, chapter 3 covers research design, sampling design, data collection and general discussion about the planning before analysis. Chapter 4 consists of descriptive analysis and inferential analysis which analyses the result that respond by the respondents with research questions that we design. Besides that, chapter 5 also comprises limitations and suggestions for prospective researchers.

1.7 Conclusion

Research background, problem statement, objectives and significance of research are explored in this chapter. It involves a simple explanation on the background of e-payment, as well as the problem faced by e-payment users.

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CHAPTER 2: LITERATURE REVIEW

2.0 Introduction

This chapter deals with the literature review of factors affecting e-payment adoption in KL. First of all, it will deal with reviews and analyses of literature done in the past as well as the research issues discussed in Chapter 1. Then, some theoretical models will be applied to determine how the adoption of e-payment in KL is influenced by S, PU, T and GI. Furthermore, correlations between IVs and DV will be illustrated in a graphical way which are discussed in theoretical or conceptual framework. Moreover, the next part is hypothesis developments which testable hypotheses will be formulated after justified by past literatures.

2.1 Literature Review

2.1.1 Security (S)

Nowadays, online payments raise a variety of security issues in the transaction process including transaction fraud, information threat and so on (Zhang, Jiang &

Huang, 2012). Lai (2016) mentioned that security is positively related with the adoption of e-payment system due to the high security standard could increase the customers’ intention to use e-payment, therefore, security should be taken into consideration while designing the e-payment system that have high security level in order to reassure customers in dealing with e-payment. However, Ade`r, Ade`r and Mellenbergh (2008); Kim, Tao, Shin and Kim (2010) and Marooﬁ, Hashemi and Nargesi (2012) stated that perceived security has positive impact on e-payment system adoption, which means that a high security able to improve the usage of e- payment. In other words, if the security level of the e-payment program is too weak, the customer would not interested in e-payment transactions (Tsiakis &

Sthephanides, 2005). Moreover, Mohammad AL-ma'aitah and Abdallah Shatat

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(2011), the appearance and development of security on technology impact significantly the growth of e-payment transaction. On the other aspect, the e- payment system is an easy target for stealing money and personal information, and this data is always transmitted in an unsecured way, and thus, makes customers refuse to use e-payment. Therefore, this indicates that the safety level directly affects the e-payment system adoption.

Besides, Ayo and Ukpere (2010) mentioned that security and adoption of e-payment are positively associated in the studies as a unified Smart ATM card is secured due to biometric authentication function. In addition, as stated by Nakhumwa (2013), an insecure e-payment system would attack by hackers and cause to low public acceptability; a secure e-payment system would provide confidence to users in order to adopt the e-payment system. However, Teoh, Chong, Lin and Chua (2013) claimed that security is a significant obstacle to the use of e-payment. This is due to customers’ confidence in the technology of e-payment system remains weak, even though their belief on their chosen bank is strong (Sathye, 1999).

However, Laforet and Li (2005) showed that the findings are incompatible with prior studies regarding to the significant relationship between security and e- payment system adoption, it implies an insignificant relationship. With compared to Singaporeans and Malaysians, if there is an advancement in technology to secure the e-payment system, Chinese consumers still would not adopt the e-payment system as they think that disclosing of their personal data is not safe, therefore, if they aware more about the technology nowadays can secure their personal data well, they may change their mind in adopting the e-payment system (Suganthi, Balachandher & Balachandran, 2001).

2.1.2 Perceived Ease of Use (PU)

Perceived ease of use demonstrates how simple a website is to comprehend, learn or operate (Ali Shawket Thiab, & Zeratul Izzah Mohd. Yusoh, 2019). It concerns the individual evaluation of the effort engaged in the technology process. There are

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certain empirical studies show that perceived ease of use will influence the e- payment adoption. Moreover, the researches such as Ali Shawket Thiab and Zeratul Izzah Mohd. Yusoh (2019), Perkins and Annan (2013), Sanghita and Indrajit (2017), Liu and Tai (2016), Rao and Goldsby (2009) and Daştan and Gürler (2016), found that there is a positive relationship between perceived ease of use and e- payment in their studies. The impact of management should focus on its corporate websites to make it easier to use, since that will boost customers ‘confidence and boost their intent to accept online banking. (Perkins & Annan, 2013).

Besides that, most of the researchers used primary data to gather by using a structured pre-tested questionnaire through a sample survey. Survey method might be categorized in phone call interviews, face to face interviews or mail survey (Sanghita, & Indrajit, 2017). However, the research shows the relationship between perceived ease of use and e-payment by collecting the data in Ghana for the year 2012. Most of the respondents had high school education which are postgraduate degree and college degree holders (Perkins & Annan, 2013). Moreover, Rao and Goldsby (2009) targeted 200 respondents to complete questionnaires whereas Daştan and Gürler (2016) completed 225 online questionnaires by using convenience sampling techniques in their studies. Liu and Tai (2016) found that they use Structural Equation Modeling to test hypothesis testing by distributing 604 questionnaires to companies, universities, schools in Vietnam over the period of December 2014 to April 2015.

However, based on the research of Ali Shawket Thiab and Zeratul Izzah Mohd.

Yusoh (2019), Sanghita and Indrajit (2017), Rao and Goldsby (2009), they highlighted that there was also a significant but negative relationship between perceived ease of use and e-payment in their studies. Ali Shawket Thiab and Zeratul Izzah Mohd. Yusoh (2019) said that the population of Bagdad is 7665000 so they are required to complete 385 samples of questionnaire. Besides, Sanghita and Indrajit (2017) said that they examined by using SPSS 25 and Principal Component Analysis to exploratory factor analysis with Varimax Rotation.

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2.1.3 Trust (T)

Trust is a main element to determine the behaviour of an entity and it is a standard for an entity selection (Zainab Aljazaf, Perry & Capret, 2010). Trust is the most important determinant of-payment system use (Thaib & Yusoh, 2019). There are some researchers such as Zhang (2009), Mohammad Auwal Kair, Siti abedah Saidin and Aidi Ami (2017) and Daniel and Jonathan (2013) revealed that trust has significant influence to use e-payment on Ghanaian customers.

Besides that, Daştan and Gürler (2016) used structural equation modeling and concluded that trust has a positive relationship on the adoption of the e-payment system. Moreover, Suwunniponth (2015) using the Stepwise approach, found a positive relationship in their study. Besides, Oney, Guven, and Rizvi (2017), Liu and Tai (2016) and Kim, Tao, Shin, and Kim (2010) using structural equation modelling proved that trust has a positive relationship with the e-payment adoption.

Rouibah, Lowry and Hwang (2016) collected data on 150 online survey questionnaires and 200 paper-based questionnaires and using partial least squares concluded that customers trust positively effect on e-payment adoption. Lastly, Barkhordari, Nourollah, Mashayekhi, Mashayekhi, and Ahangar (2016), used Confirmatory Factor Analysis and Structural Equations Modeling revealed the same result with other researchers.

Moreover, some of the researchers obtained the different results. As an illustration, Mohamad Amin, Mohd Fuaad Said, Choo and Raja Nerina Raja Yusoft (2017) applied structure equation modeling (SEM) and proved that trust is having insignificant correlation with the adoption of e-payment system. Furthermore, Teoh, Chong, Lin and Chua (2013) that used survey instrument also claimed that there is an insignificant relationship between trust and the adoption of e-payment system.

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2.1.4 Government Intervention (GI)

Government intervention has facilitated EPS adoption and usage by strengthening the existing laws on financial crimes and empowering the relevant agencies such as the Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices Commission (ICPC) to combat cyber-crimes (Igudia, 2017). Zhang (2009) stated government intervention plays a significant role in adoption of electronic payment systems. Electronic payment system is growing rapidly, thus there may be illegal issues such as money laundering, tax evasion and other breaches to occur. Hence, the government should come out with effective measures such as policies and regulations to cope with those issues. For example, all parties in various kinds of transactions, especially the dealers and customers, must strictly obey the government rule and regulations when undergoing the online transactions, such as electronic commerce contracts, transfers of digital funds, insolvency, taxation, digital signatures, and privacy matters. Lee, Park and Ahn (2001) and Swindells and Henderson (1998) had also indicated that regulatory issues are the important factors of e-payment system adoption. Besides, the action of commercial banks in eliminating the charges previously imposed on card holders for using payment cards at ATM terminals of different banks was another positive intervention of the government that aims to encourage the e-payment adoption.

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2.2 Theoretical Review

2.2.1 Technology, Organization & Environment (TOE) Framework

Figure 1: Technology, Organization & Environment (TOE) Framework Sources: Tomatzky and Fleischer (1990)

TOE framework was developed by Tomatzky and Fleischer (1990) to research the firm’s adoption decision for technological information and to evaluate the various factors which are likely to affect the adoption decision. There are three components in TOE framework, which are technology, organisation and environment that affect an organisation's process of adopting and implementing a new technology (Lippert

& Govindarajulu, 2006). The technological context considers both external and internal technologies relevant to the company, which include the technologies that already implemented in the company and those available on the market but not currently used by the company. The organisational background relates to the features of the organisation and resources which include the size of firm, amount of slack resources, linking structure between workers, degree of formalization and intra firm communication process. The environmental context comprises the industry’s structure and size, contestants of firms in the market, the prevalence of

External Task Environment

• Industry Characteristics and Market Structure

• Technology Support Infrastructure

• Government Regulation

Organization

• Formal and Informal Linking Structure

• Communication Processes

• Size

• Slack

Technological Innovation Decision Making

Technology

• Availability

• Characteristics

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technology service providers and the government’s regulatory environment (Tomatzky & Fleischer, 1990).

TOE framework provides adaptable innovation to the firm, so that the firm could adopt the most suitable technology for its operation (Li, Lai & Wang, 2010).

Besides, firms pursue renovations due to pressures of gaining a competitive advantage or acquiring industry identification (Kuan & Chau, 2001). In addition, Li, Lai and Wang (2010) mentioned that with the advanced technology, firms with e-payment systems able to improve its security level as the new technology could help the firm to reinforce the transaction process with high security safeguard for customers’ information. Baker (2012) stated that, although TOE framework is assisting firms to adopt new technology, however, TOE framework is limited in listing the distinct factors applicable to different contexts of adoption, which means that there are no new constructions have been applied to the framework. Thus, it may lead to lack of development.

2.2.2 Technology Acceptance Model (TAM)

Figure 2: Technology Acceptance Model (TAM) Sources: Davis (1989)

TAM is a theory that developed and tested a theoretical model on user adoption of computer-based information systems for the impact of systems features (Davis, 1989). There are two significant goals to be established in the context of the TAM.

First of the significant goals is to improve our comprehension of processes for user External

Variables

Perceived Usefulness

Perceived Ease of Use

Behavioral Intention to Use

Actual System Use Attitude toward

Using

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acceptance and offer new insights into successful information systems design and implementation. Besides that, another significant goal is to provide the theoretical foundation for a practical "user acceptance testing" technique, which would allow system developers and implementers to assess the new technologies proposed before they are implemented. Perceived ease of use is one of the key variables that are regarded which explain the results directly or indirectly in TAM.

According to the research of Scherer, Siddiq, and Tondeur (2019), they determined the problems of the TAM. Cheung and Sachs (2006) found that there are significant changes in particular TAM routes such as the significant direct relationship between perceived ease of use and behavioral intention. Besides that, Burton-Jones and Hubona (2006) highlighted that the role of external factors in TAM key structures explaining the variation differs (as cited in Scherer, Siddiq, & Tondeur, 2019). To illustrate with the efficiency of teachers' computers explains significant variations in perceived ease of use, facilitating technology circumstances at college weakly predict studies differ in the relationship of perceived ease of use and e-payment adoption. Generally, the most important factors in TAM, PEU are the degrees at which one considers the use of technology to be effort-free and boost their job performance or task performance.

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2.2.3 Model of Trust (MOT)

Figure 3: Model of Trust (MOT) Sources: Mayer, Davis, and Schoorman (1995)

Trust means a litigant willing to be defenseless to the actions of another litigant due to the assumption that others will accomplish a different behaviours considerable to the trustor, regardless of the ability to monitor another party (Mayer, Davis, &

Schoorman, 1995). MOT was exploited by Mayer, Davis, and Schoorman (1995) and they have mentioned that the level of trust will conduct to risk taking in a relationship moderated by perceived risk. For example, Lee and Huynh (2005) said that when clients and the service provider organizations have a higher level of perceived mutual trust in their relationship, the client will have more willingness for risk taking. MOT is widely used to explain consumer behaviour relationships in the Internet and management (Lee & Huynh, 2005). Moreover, Ring and Van de Ven (1992) because of the risk of transaction, managers pay more attention to themselves with the trustworthiness of the other party. Besides, Pavlou (2003) surmise that this model has two kinds of trust, which are control trust (trust in

Ability

Risk Taking in Relationship Trust

Integrity Benevolence

Trustor’s Propensity

Outcomes Perceived Risk

Factors of Perceived Trustworthiness

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control mechanisms) and party trust (trust in another party). Level of risk is a precondition for trust to exist, thus web retailers have to lower down the infrastructure-related concerns to advance consumers trust in e-commerce because environmental uncertainty is highly affected by behaviour actions of the online seller (Pavlou, 2003).

To summarize MOT, if consumers trust in a person, product, or service they will be willing to take the risks and the trust is based on the consumers behavior such as ability, benevolence and integrity. In short, MOT is related to our research. For example, consumers highly trust in using e-payment system, so they are more willing to take the risk to make transactions by using the e-payment system.

2.3 Proposed Conceptual Framework

Independent Variables Dependent Variable

Figure 4: Proposed Conceptual Framework Source: Developed for the research

Based on the figures above, this research adopts TAM to research the relationship between both variables. According to Gajendra Sharma, Subarna Shakya and Purushottam Kharel, (2014), TAM refers to how users determine the factors affecting the decision to accept new technologies before using and adopting it (as cited in Davis (1989)). In other words, TAM is used in explaining behavioral intention and attitude to use the technology which refers to the perceived ease of use. Besides, additional external factors such as T, S, PU and GI are also integrated into the model to investigate their impacts on the e-payment adoption in KL.

Security (S) Trust (T)

Perceived Ease of Use (PU) Government Intervention (GI)

Adoption of e-payment (EP) in KL

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2.4 Hypotheses Development

This research focused on KL, Malaysia. The hypothesis development are stated below:

H1: There is a significant relationship between Security (S) and the adoption of E- Payment (EP).

H2: There is a significant relationship between Perceived Ease of Use (PU) and the adoption of E-Payment (EP).

H3: There is a significant relationship between Trust (T) and the adoption of E- Payment (EP).

H4: There is a significant relationship between Government Intervention (GI) and the adoption of E-Payment (EP).

2.5 Conclusion

Overall, this chapter discussed four IVs which are S, PU, T and GI and the DV which is the adoption of EP in KL in the literature review. After going through the theoretical review, there were several theories used to figure out the determinants influencing the adoption of e-payments in KL such as TOE Framework, TAM and MOT. In addition, research stated that there were positive and negative relationships between IVs and EP.

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CHAPTER 3: METHODOLOGY

3.0 Introduction

Chapter 3 expounds the research technique which includes design of research, sampling design, model of sampling, technique of gathering data, instrument of research, constructs measurement, and also the techniques applied for processing data and analyse data.

3.1 Research Design

The information of this research can be collected by using primary data (Douglas, 2015). Several methods like surveys, questionnaires, direct observations and interviews are usable to gather data (Saunders, Lewis & Thornhill, 2009). A self- administered survey questionnaire approach is used to gather primary research data as surveys are relatively easy to administer (Jong, 2016). Besides, self-administered survey method saves time because interview appointments are not needed (Niki, 2018). Self-administered surveys also provide convenience to respondents because the respondents only have to answer the questions (Deren, 2013). The collection of results from the respondents can also be faster (Deren, 2013). Moreover, it is considered as a low-cost method of surveying large samples.

3.1.1 Quantitative Research

Quantitative methods are used in this research as our research design to look over the factors affecting the adoption of e-payment (Wright, O’Brien, Nimmon, Law &

Mylopoulos, 2016). According to Goertzen (2017), quantitative research method can be created by numerical data and it is structured to collect and analyse data.

This research numerical data is gathered through a survey questionnaire that is

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distributed in KL, as KL is the second greatest city in Malaysia with 1.453 million people in year 2019, as stated in the statistics from Department of Statistics Malaysia.

3.1.2 Descriptive Analysis

Typically, descriptive analysis provides information on the features of the population research. Descriptive analysis was applied in this research to determine the factors that affect the adoption of e-payment in KL, Malaysia. Besides, this research also examines the relation between variables.

3.2 Sampling Design

Kothari (2004) stated that it is a definite plan for a particular population to get a sample by using sample design. It relates to the method or process used by the investigator when choosing sample objects. The layout of samples may also specify the number of products in the sample such as the sample size. Sample design is determined before data is collected so that the researcher can choose from the sample designs are designed. Some designs are more accurate and simpler to use than others. Researchers must pick a dependable and research-fitting design sample.

3.2.1 Target Population

A crowd or participant with special qualities of interest and relevance is known as target population. For the large research population, a set of requirements for selecting respondents may lead in the monitoring of the most qualified and convenient participant group without specifying the target and available populations (Asiamah, Mensah & Oteng-Abayie, 2017). For this research, the target population is 18 years old and above in UTAR Kampar Campus and residents in

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KL. The first reason to focus on the aged 18 years old and above is because people from these age groups are highly relied on technology, smartphones as well as e- payment in their daily lives. Moreover, the reason for choosing UTAR Kampar Campus is because UTAR is the largest private university in Malaysia. Besides that, the third reason for this research is to focus on residents in KL. It is because World Population Review (2016) claimed that KL has the highest population in Malaysia with an estimated 1.73 million people in 2016. Thus, the population in KL is the most suitable area to collect data for this research.

3.2.2 Sampling Frame and Sampling Location

Sampling frame is the sample that is drawn from a source of source device (Turner, 2003). Sampling location is to select a location or area for collecting data. In the research, since the target population is 18 years old and above who study or work in KL. Sampling method consists of probability samples and non-probability sample methods, in which the former states that the potential for each population element to have the recorded is known (non-zero) while the latter refers to the probability of selecting each population and the researcher unable to be sure every population component has an opportunity not to be selected at zero. The non- probability sample approach comes in the form of voluntary sampling and convenience sampling methods. Voluntary sampling deals with people who select themselves for the survey, but the convenience sample procedure consists of those who are easily accessible. Hence, this research uses convenience sampling method in distributing questionnaires via face to face interaction with respondents.

3.2.3 Sampling Elements

Sampling is an equal level of sample which included in the research such as individual, organization, group or business and so on are one of the sampling element methods. This is feasible if each person in the target population is identified

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and contacted-something often unlikely because of cost impacts or impracticality.

The respondents will be residents of KL who aged 18 years old and above to participate in this research. One of the reasons why young adults, middle-aged adults and older adults are chosen to participate in this research is because of their understanding and basic knowledge on e-payment.

3.2.4 Sampling Techniques

Churchill and Iacobucci (2009) highlighted that sampling elements are categorized as probability and non-probability sample. Probability sampling is about choosing the sample randomly whereas non-probability sampling is not. Instances of non- probability sampling include voluntary sampling and convenience sampling methods while for the probability sampling, they include stratified random sampling, cluster random sampling, simple random sampling and so on. However, this research decided to choose a convenience sampling method to run the test in this research. Convenience sampling involves collecting samples from a convenient place such as the mall, college, researchers’ intern workplace in KL.

3.2.5 Sampling Size

Krejcie and Morgan (1970) mentioned that 385 sets of questionnaires will be given to respondents for the actual test. There are 400 respondents who will participate in the research. Before starting the actual test for the research, this research should do a pilot test which can be investigated and improved on the tool and the methodology (Shea, & Bidjerano, 2018). There are 30 sets of questionnaires that will be administered to students in Universiti Tunku Abdul Rahman, Kampar Campus who are residents from KL and managed to get back all of the questionnaires for pilot testing.

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3.3 Data Collection Method

Data collection refers to the process that involves collecting and evaluating information on specific variables in an existing framework. This research uses primary data in collecting data.

3.3.1 Primary Data

Primary data means information gathered by researchers directly and personally (Surbhi, 2017). There are a few sources to gather the primary data. For instance, a researcher can conduct surveys, observations, experiments, questionnaires and personal interviews to collect data. Hence, this research uses self-administered survey questionnaires as data collection.

3.4 Research Instrument

3.4.1 Questionnaire

Written interview, which can be known as questionnaire, is one of the research instruments that composed of a set of questions to collect respondents’ information (McLeod, 2018). There are different kinds of questionnaires such as telephone questionnaire, mail questionnaire, computer questionnaire, and in-house survey (“Questionnaires,” 2019). One of the advantages of using questionnaires as the research instrument is cost effective (Rainwater, 2019). Besides, it is cheaper than other methods to acquire vast amounts of people’s particulars in a short time period.

Besides, questionnaire helps to reduce bias as it does not involve any middleman to interpret the data and hence, this prevents the researchers from affecting the answers by using verbal or non-verbal clues. Moreover, questionnaires provide more anonymity than other research instruments. Respondents’ identities will not be revealed as questionnaires only release personal information such as age, gender or

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race. Respondents are aware and/or consent to data protection when participating in the survey.

3.4.2 Questionnaire Design

The design of the questionnaire is complex to implement because there are numerous details to be concentrated at the same time (“Questionnaire Design,”

2019). The first step to design a good questionnaire is making preliminary decisions about the information needed for the survey, determining the target respondents and the techniques used to interview them. Secondly, it is important to decide the question content such as the utility and effectiveness of data, ability and willingness of respondents to answer the questionnaires and the effect of external factors. The next step is to determine the response format whether it is open-ended questions, close-ended questions and or other formats. Then, the question content must be worded appropriately before framing the questionnaire structure. Lastly, pilot test and revision should be formulated to dorm a final draft (Sreejesh, Mohapatra &

Anusree, 2014).

In this research, the questionnaire is made up of six parts which are Section A, B, C, D, E and F. Section A contains eight questions for the demographic profile of the respondents. The questions are related to gender, age, occupation, level of education, work experience, monthly income, etc. The respondents are required to tick for one or more answers for each question. In the other sections, it seeks for the respondents’ opinions regarding the intention of adopting e-payment in near future and the factors affecting the adoption of EP which are S, PU, T and GI. The answers to the questions given by the respondents must be according to the Likert scale which consists of five scales (1) = SD, (2) = D, (3) = N, (4) = A and (5) = SA.

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3.4.3 Pilot Test

Wright (2018) mentioned that before conducting the main research, it is necessary to carry out a pilot test to test the research approach with a small group of people.

A pilot research is crucial for determining the possible issues and shortages associated with the research instruments and protocol before carrying out the research (Hassan, Schattner, & Mazza, 2006). Besides, it also aids in making the researcher more familiar with the process in the protocol. One of Roscoe's simple rules of thumb stated that sample size of 30 or more are recommended for pilot test (Hill, 1998). Moreover, Browne (1995) also mentioned that based on general flat rule, sample size of 30 or more are better in estimating a parameter (Whitehead, Julious, Cooper & Campbell, 2015). Hence, 30 sets of survey questions are assigned in this research among students in UTAR, Kampar campus who reside in KL. Then, for conducting a reliability test, the results of 30 sets questionnaires will be collected via SPSS 25.

Table 1: Pilot Test

Variables Cronbach's Alpha

S 0.702

PU 0.831

T 0.760

GI 0.866

Sources: Developed from the research

3.5 Constructs Measurement

The measuring scale helps to determine how interviewees react to the variables of research differently (Sekaran, 2003). Researchers will gather and analyze the data to determine the statistical inference test. This questionnaire contains four scales such as nominal, ordinal, interval (likert scale) and ratio as measurement. The questionnaire comprised of six parts whereby Section A is about the respondents’

demographic profile whereas other sections are about the questions regarding

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different independent variables (S, PU, T and GI) to identify their effects on e- payment adoption.

3.5.1 Nominal Scale

The nominal scale usually addresses qualitative or non-value numbers. Sekaran (2003) mentioned that in order to calculate percentage or frequency, the answer from nominal scale cannot be repeated and must have at least one answer. For instance, taking the scale of 0 as male and 1 as female for a gender measurement, the number given is just a label and does not have any quantitative value.

3.5.2 Ordinal Scale

Usually, it is used to determine non-numeric ideas, for instance, satisfaction, discomfort, happiness and others. Ordinal scale had been used in Section A (demographic profile) of this questionnaire to gather the respondents’ information.

3.5.3 Interval Scale

Interval scale deals with quantitative data which allows the existence of zero points in the scale. Besides, the difference between two variables of an interval scale are meaningful. Sekaran (2003) stated that differences in the respondents’ preference are measured by the scale. Likert scale are the most common scale measurements used for research. It contains five ranges which include (1) SD, (2) D, (3) N, (4) A and (5) SA to determine how likely the statements are being agreed or disagreed by the respondents. Therefore, likert scale had been used in this questionnaire so that the degree of satis

FACTORS INFLUENCING THE ADPOTION OF E-PAYMENT IN KUALA LUMPUR

FACTORS INFLUENCING THE ADPOTION OF E-PAYMENT IN KUALA LUMPUR

FACTORS INFLUENCING THE ADPOTION OF E- PAYMENT IN KUALA LUMPUR

FACULTY OF BUSINESS AND FINANCE DEPARTMENT OF FINANCE

DECLARATION

ACKNOWLEDGEMENT

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

LIST OF ABBREVIATIONS

ABSTRACT

1.1. Research Background

Problem Statement

1.3 Research Objectives

Research Questions

Significance of Study

Outline of Research

CHAPTER 2: LITERATURE REVIEW

2.1.2 Perceived Ease of Use (PU)

2.1.3 Trust (T)

2.1.4 Government Intervention (GI)

Technological Innovation Decision Making

2.2.2 Technology Acceptance Model (TAM)

Figure 2: Technology Acceptance Model (TAM) Sources: Davis (1989)

2.2.3 Model of Trust (MOT)

2.3 Proposed Conceptual Framework

Independent Variables Dependent Variable

2.4 Hypotheses Development

2.5 Conclusion

3.1 Research Design

3.1.2 Descriptive Analysis

3.2.2 Sampling Frame and Sampling Location

3.2.4 Sampling Techniques

3.3 Data Collection Method

3.4.1 Questionnaire

3.4.2 Questionnaire Design

3.4.3 Pilot Test

Table 1: Pilot Test

3.5 Constructs Measurement

3.5.1 Nominal Scale